Facebook Inc (NASDAQ:FB) is operating an online auction from those, who want to buy advertising space on the social networking platform. However, there is some twist in the auction as the highest bidder may not preferably get the space on Facebook.  A combination of high clicks-through rate and positive ad engagement along with high enough bid will let the bidder win the auction, says a report from InsideFacebook.

facebook

Four options to bid

Selecting on the bidding types would help the bidder to win. At present, Facebook offers four options; Cost per click (CPC), Cost per thousand impressions (CPM), Optimized CPM (oCPM) and Cost per action (CPA).  There cannot be any specific winning strategy, so testing the options will be more viable, suggests the report.

Cost per click is the most common bidding type owing to its characteristic of showing the stable results along with being easily understandable as user only pays for the clicks. Those who want to get more likes, comments, shares or clicks should opt for this option, suggests the report.

Cost per thousand is, also, a common method, and the advertiser needs to pay when someone sees their ad. CPM is viable option, if the audiences are highly targeted like with small custom Audiences, Lookalikes and for maximizing campaign reach.

Most advanced option from Facebook

Optimized CPM is the most advanced bidding type introduced Facebook Inc’s engineers. The strategy works, when it identifies the people who most probably take a specific action such as buying the product at the web store after seeing the ad. Data required for this type of strategy is very high, and the audience should be more. oCPM might not be an optimum solution, if the target audience is smaller than 100,000 people, or the campaign gets less than 25 conversions per day.

With oCPM, high click and conversion rates matter a lot on the first day of the campaign. With the increasing click and conversion data, the oCPM algorithm becomes smarter.

Cost per action functionality is similar to the oCPM algorithm, but only works with the mobile app installs, page likes, offer claims and link clicks. CPM and oCPM charge on the basis of the amount of impression, and CPM charges by the amount of real conversions.

In the end, report says that bidding “is only one part of marketing performance optimization, but very crucial one.”